Apartment vs house: Which property should you buy and why?
Choosing between buying an apartment or a house depends on your finances, your lifestyle and your property goals.
While some people prefer the space and flexibility of living in the suburbs, others favour the convenience of inner-city living. From price to space and maintenance requirements, both houses and apartments have several pros and cons. If you're buying a property for investment purposes this becomes a whole different question, depending on your strategy as an investor.
Whatever you choose, we've outlined the issues you need to consider and the benefits and drawbacks of both houses and apartments.
Buying a house
- Floor space. If you want to conquer the final frontier and get more space for your family to live in comfortably, houses offer far more room to move than apartments.
- Outdoor space. If you have a green thumb, you want to expand your home or if you have young kids, a backyard is useful. You can build a pergola or entertaining area and enjoy the freedom of having your own outdoor space.
- Flexibility. If you own a house, you can more or less do what you want — there are no owners’ corporation or strata laws to abide by. As long as you keep council and building regulations in mind, you’re pretty much free to renovate however you like. You can expand or upgrade the house, adding value and making the place more liveable.
- Privacy. Another benefit of living in a house instead of an apartment is that you’re generally not living in as close proximity to your neighbours. So you can enjoy your life without having to worry about disturbing your neighbours (or being disturbed by them).
- Maintenance. Lawns need mowing, gutters need cleaning, trees need trimming and windows need washing. A house can be a lot of work. That's fine if you love DIY projects and gardening. If you don't, the extreme low maintenance aspect of apartment living is pretty appealing.
- Higher costs (and more bills). Living in a house is generally more expensive than living in an apartment. You have more space to heat and cool, and more furniture and equipment to buy.
Buying an apartment
- More affordable. While there are some exceptions to the rule, apartments are generally cheaper to buy than houses. According to figures from Domain Group (Domain House Price Report March Quarter 2018), Sydney’s median house price was $1,150,357. The median apartment price was just $740,041.
- Less maintenance. You don’t have to mow the lawn or tend to the garden when you own an apartment. There’s also the fact that there are plenty of maintenance tasks that can be looked after by strata, meaning you have more free time to do whatever you want.
- Low cost. While the reduced space of apartments can be a drawback, it also results in cheaper electricity and gas bills.
- Location. Many apartments are built near city centres, allowing you to live closer to everything, from transport and schools to restaurants and even your work.
- Extra facilities. Owning an apartment might also give you access to a whole host of building facilities. There could be a pool, gym, tennis courts, playground, and even a shared garden. These added inclusions need to be taken into account when deciding whether to buy an apartment or a house.
- Security. Thieves often have to pass through several layers of security to get to your apartment door, which isn’t the case with many houses.
- Strata/Owners’ corporation by-laws. Living in an apartment means abiding by the rules imposed by the owners’ corporation, such as not hanging washing over the balcony or not having pets in the property. If you want to renovate or upgrade your apartment, you may need to seek approval first.
- Fees. You’ll also need to pay a fee to the owners’ corporation to cover shared maintenance costs, so remember to take this into consideration when calculating total costs.
- Less space. Apartments don’t offer as much living space as houses.
- Less privacy. If you don’t like listening to your neighbours fight, entertain guests or get up to anything else in the privacy of their own home – or the fact that they can probably hear you doing the same things – apartment living may not be for you.
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Do houses or units make for better investments?
If you're investing in property the apartment versus house question looks quite different. And it comes down to your strategy and goals.
All other things being equal, a house will bring in more rental income than an equivalent apartment. But possibly not as much as the extra purchasing cost, given that houses sell at much higher prices. If you're looking to maximise rental income while minimising expenses then an apartment might be a better fit. Crunch the numbers and work out which is better for you. But you'll also need to consider capital growth.
Most investors are really focused on making capital gains, which refers to the growth in value of the property. In a rapidly rising market many properties have even doubled in value over five to ten years. This investment strategy has been a huge wealth creation vehicle for many Australians and has played a large role in fuelling the recent property boom.
The data is clear: houses show much stronger capital growth than apartments. The majority of Aussies prefer houses, and owning land is seen as more valuable than owning a piece of an apartment complex high up in the sky. But this trend is slowly changing as more and more Australians live in apartments.
So if you’re trying to decide whether to invest in a house or an apartment, it’s worth looking past the type of property and examining each potential investment on its merits. Where is it located? What facilities does it offer and what other amenities are nearby? What sort of capital growth could you expect from this type of property? How much rental income could the property generate? Answering these questions will help you make up your own mind.
House vs apartment: making your decision
Regardless of whether you’re an owner-occupier or an investor, the best way to solve the apartment vs house dilemma is to consider your needs and plan ahead. For example, if you’re thinking of starting a family in a few years, is a tiny inner-city apartment really the best option? On the other side of the coin, if your kids will most likely leave home in the next few years, is a massive five-bedroom house the best solution?
Once you know what you need in a home or an investment both now and into the future, you’ll be able to decide whether an apartment or a house is right for you.
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